Qualcomm (QCOM, Financial) has a very wide market for networked mobile device, and it provides almost every known service relating to modern wireless communications. It collects heavy license fees from other companies to make CDMA chips which it pioneers. The company’s chip business is highly profitable and growing.
The company also supplies the heart of a mobile, its processor. Nokia Lumia 920, a premium Windows phone runs on Qualcomm's processor, Snapdragon dual-core. Further, Qualcomm's dominance in 4G LTE baseband hardware sales has led to the adoption of its Snapdragon S4 processors. Snapdragon processors are one of the best processors in the world, and the company continuously remodels them to suit the needs of its users.
The bright future
Currently in the market there is no other company apart from Qualcomm that has a viable 4G solution giving it a competitive hold in the market. Moreover, the 4G LTE baseband hardware is an expanding business which will not let competition affect Qualcomm's market share.
The company’s customers like Apple (AAPL, Financial), Samsung (SSNLF, Financial) and HTC will surely help its business in the near future. Whereas Apple till now dominates the U.S. market, Samsung and HTC are expanding in the emerging market placing the company in a win-win situation.
Qualcomm has always kept its focus on customers which always puts it a step ahead from its competitors. It spends heavily on R&D and comes out with products customers want, helping the company avoid market saturation.
Competition
A major competitor of Qualcomm in the semiconductor industry is Broadcom (BRCM) with its chips ranging from mobile devices, set-top boxes to network equipment. It also enjoys a close relation with smartphone companies Apple and Samsung. iPhone 5 and fourth-generation iPad’s are powered by Broadcom’s chips. The company’s chips are also placed in many of the Galaxy devices, and with the growth in the sale of smartphones in the emerging markets things should get better for it.
The company is well positioned to tap in the growth in near field communication (NFC) technology. Its connectivity combo SoCs are gaining acceptance which is clearly evident from the 200 million units that were shipped in the previous quarter. With so much to deliver and at a forward P/E of 11 times and PEG ratio of less than one, it is a solid company to invest in.
Conclusion
Qualcomm dominates the semiconductor industry, and is simultaneously growing with a diversified portfolio of businesses. It is well positioned to dominate the networked mobile market with further boom in the use of smartphones in the emerging markets. The company has a robust balance sheet. At a trailing P/E of 18 and a forward P/E of 13 Qualcomm is a good buy.
